Save as Much as You Can on your Taxes, Quick Tip on How to Record All Deductable Business Expenses

10 replies
Hello Warriors,

I used to work as a Tax Preparer, and today I decided to find a way to organize and record my business expenses, so this tax year will be much less painful for me than the previous year was.

Note:
If you haven't learned it yet, US Government taxes business at much higher rate than regular employees, so you must record and claim every legally allowed tax deductible expense to make sure you don't lose all of your money that you worked so hard for, comes the beginning of next year.

As I was doing my personal research, I realized that many of the warriors (especially US based ones) can benefit from this information as well. So here you go.

1. Selecting a Platform

I needed a platform to keep track of my expenses on. I decided to use Google Docs because I work on many different computers. Any spreadsheet type of service would work though.

2. Organizing the Data

I went to Schedule C - a form used by US small business to report their income and expenses at the end of the year (study it) - and noted down all of the categories for deductible expenses.
  • Advertising
  • Car and truck expenses
  • Commissions and fees
  • Contract labor
  • Depletion
  • Employee benefit programs
  • Insurance (other than health)
  • Interest paid
  • Mortgage (paid to banks, etc.)
  • Legal and professional services
  • Office expense
  • Pension and profit-sharing plans
  • Rent or lease (see instructions)
  • Repairs and maintenance
  • Supplies
  • Taxes and licenses
  • Travel, meals, and entertainment:
  • Utilities
  • Wages Paid (less employment credits)
  • Other expenses
3. Creating the Spreadsheet

Next I created a spreadsheet with the following column headings (copy and paste should work if you are making your own version)

Date Category Description Income Expense Total

4. Adding the Categories

I pasted the mentioned before deductible categories to the right side of the newly created table, see image bellow. That way I will be able to just copy and paste data into the category column:



5. Keeping Total Count

For the total cell of the first line I used the following formula: F2=D2-E2

This formula subtracted Expenses from Income, and placed the result into the total category.

For next total cell I used the following formula: F3
=F2+D3-E3

What it does, is takes the result of the previous total line, adds in expenses from this line, and subtracts expenses from this line, so you get an updated total.

Then all I had to do is simply drug down the cornet of the cell, to auto update all of the following total cells, with relevant formula.

6. Conclusion

That's it. Now all I have to do, is make one quick entry whenever I get a business income/expense relevant email and I am done.

I hope you find this post helpful. Feel free to ask me any additional questions, or may be share some of your own tips with the rest of us

7. Additional Info

Giving credit where its due, I was inspired by the following blog post: http://www.providentplan.com/3072/fr...or-schedule-c/ .

There author provides more detailed background on every deductible category and a free spreadsheet that you can download for your own use. (It is similar to mine, but I think my design is more simple. And I like simple).

Mad link juice, but I think he deserves it.

If you want to copy and paste the deductible categories into your spreadsheet, here they are again without the bullet points:

Advertising
Car and truck expenses
Commissions and fees
Contract labor
Depletion
Employee benefit programs
Insurance (other than health)
Interest paid
Mortgage (paid to banks, etc.)
Legal and professional services
Office expense
Pension and profit-sharing plans
Rent or lease (see instructions)
Repairs and maintenance
Supplies
Taxes and licenses
Travel, meals, and entertainment:
Utilities
Wages Paid (less employment credits)
Other expenses
#business #deductable #expenses #quick #record #save #taxes #tip
  • Profile picture of the author Steve Wells
    I could be wrong, but nor sure? I like your idea, maybe you could load up a word doc with it all layed out for every to have and post it in the war room?

    On another note: One thing that I have noticed, and I think many Internet Marketers may be unintentionally missing, is that if you outsource work to another country, you have to pay their taxes to the US goverment......

    So, basically from what I have read on the goverments tax website, it states that they are treated as employees, and since they do not live in this country and you do, and they are not paying taxes on their income, you have to pay their income taxes, even though they are not citizens, because the money is going out of the U.S.

    I know that may sound confusing and I may have missed something, but, from the way it reads on the goverment site, the country you are outsourcing to has to have a tax treaty with the US goverment that states they are tax exempt and/or they have a tax amount they are liable for, and if they do not pay it, you have to pay it for them as if they are your own employee.



    P.S. I could be all wrong, but it sure seems to point that the US goverment wants NO MONEY to go out of the country to another, without taxes being collected on that money, from either the outsourcer or outsourcee
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    • Profile picture of the author feedtherightwolf
      Outsourcing to other countries via the internet is tricky. Sometimes its just easier not to claim that money as tax deduction at all, instead of investing the time needed to figure it out. At least it is the case for such small business as mine.
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    • Profile picture of the author Apollo-Articles
      Originally Posted by Steve Wells View Post

      I could be wrong, but nor sure? I like your idea, maybe you could load up a word doc with it all layed out for every to have and post it in the war room?

      On another note: One thing that I have noticed, and I think many Internet Marketers may be unintentionally missing, is that if you outsource work to another country, you have to pay their taxes to the US goverment......

      So, basically from what I have read on the goverments tax website, it states that they are treated as employees, and since they do not live in this country and you do, and they are not paying taxes on their income, you have to pay their income taxes, even though they are not citizens, because the money is going out of the U.S.

      I know that may sound confusing and I may have missed something, but, from the way it reads on the goverment site, the country you are outsourcing to has to have a tax treaty with the US goverment that states they are tax exempt and/or they have a tax amount they are liable for, and if they do not pay it, you have to pay it for them as if they are your own employee.



      P.S. I could be all wrong, but it sure seems to point that the US goverment wants NO MONEY to go out of the country to another, without taxes being collected on that money, from either the outsourcer or outsourcee
      I'm not sure if this is correct, think of it the other-way round if your american and sell a digital product to a Australian you'd pay that income tax to the american government not the Australian government.

      Correct me if I'm wrong,

      Sam
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  • Profile picture of the author kevinw1
    If you use simple accounting software, and the right tax software, they will talk to each other and reduce a good deal of the manual work involved in messing around with a spreadsheet. Of course, they cost you something: but they are a business expense, and you can deduct them
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    • Profile picture of the author feedtherightwolf
      Originally Posted by kevinw1 View Post

      If you use simple accounting software, and the right tax software, they will talk to each other and reduce a good deal of the manual work involved in messing around with a spreadsheet. Of course, they cost you something: but they are a business expense, and you can deduct them
      Is that how people do it these days? Great point. To be honest with you, I didn't even think about it.

      That being said, I think I will stick with my spreadsheet. I am projecting that I will earn about $5000 from business, and I don't really need an accounting software for any of my needs, spreadsheet will do. At the end of the year, I will just download it as an excel file, and use built in excel filter to filter by each category.

      But like I said, I prefer to keep things simple, but not everybody is that way.
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      • Profile picture of the author moviemanmitch
        Thank you a million times for this post. I have been looking all over the web for this info.
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  • Profile picture of the author FrankieTP2
    Thanks given Now I have a question... Should I keep receipt copies of each expense and/or income?
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    • Good stuff, thanks. The end of the year will be here before you know it.
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      • Profile picture of the author feedtherightwolf
        Its funny how this thead came back to live 4 months after I posted it

        And yes you do want to keep all of your reciptts for everything that you will be claiming on your taxes, espexially for any deductions. This is pretty easy these days though, since most of the recipts are digital anyway, I just have a lable in my main gmail account called 2011 business bills and I archive all my bills there.
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        I am not a guru, nor do I pretend to be one. I am here to learn and to share my experience. Everything that I say, I say from my heart.
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